KYODO PAPER HOLDINGS

The Group operates in the paper wholesale business, and there is a possibility that increases in purchase prices may not be immediately passed on to selling prices. In addition, since much of the raw material for paper and paperboard products is imported, product prices are also affected by crude oil price and exchange rate fluctuations. As countermeasures, the Group works to strengthen relationships with customers and achieve appropriate pricing through careful explanation of market conditions, while also promoting diversification of handled products such as paperboard, industrial paper, and household paper.

Within the distribution structure that runs from paper manufacturers through wholesalers to converters and end users, the Group deals directly with converters and users as a wholesaler, and situations may arise where increases in purchase prices cannot be simultaneously passed on to selling prices amid market fluctuations. Changes in domestic and overseas economic conditions may directly affect business performance. As a countermeasure, the Group strives for stable supply and appropriate pricing through meticulous sales activities.

As of the end of the current fiscal year, the Group has no interest-bearing debt; however, if the Group procures funds through borrowing from financial institutions in the future, business performance may be affected depending on market interest rate trends. While maintaining a basic policy of zero interest-bearing debt, the Group maintains close communication with its correspondent financial institutions and has established a system to enable optimal fund procurement when necessary.

The Group extends credit sales to its business partners, and if a partner's creditworthiness deteriorates rapidly, business performance may be affected by the inability to collect accounts receivable, among other issues. As countermeasures, the Group strictly manages credit limits for each business partner and undertakes credit information gathering and receivables protection measures through contracts with multiple factoring companies.

The Group holds shares of companies with which it has close business relationships, such as suppliers, sales partners, and correspondent financial institutions, and investment securities accounted for 6.7% of total assets at the end of the current fiscal year. Business performance and financial position may be affected depending on stock market trends. As countermeasures, the Group monitors and manages fair value fluctuations on a daily basis, reports regularly to the management committee, and verifies the continued rationale for holding such securities.

The Group has bases in 8 locations nationwide, but in the event of a large-scale earthquake, natural disaster, novel infectious disease, or similar event, sales activities may be restricted, sales opportunities may be lost due to disruption of logistics, damage may occur to facilities and products, and business partner credit risk may increase, among other effects on business performance. As a countermeasure, the Group has created a

Much of the raw material for paper and paperboard products is dependent on imports, creating a structure in which exchange rate fluctuations directly affect product prices. In a yen depreciation phase, purchase prices rise through increased raw material costs, and if the pass-through to selling prices is delayed, profitability may be squeezed. As a countermeasure, the Group works toward appropriate pricing while carefully explaining market conditions to customers.